Credit buyers are about to see a very crowded calendar. Banks are lining up north of $138 billion of buyout financing, with US volumes at their biggest since 2007 and Europe at the highest since 2021, per JPMorgan Chase.
There appears to be plenty of cash on hand, bolstered by strong money moving into credit vehicles and a jump in newly issued collateralized loan obligations, the primary buyers of leveraged loans. Choice, though, invites judgment. Investors are set to drill into business quality, sectors, and who the private equity sponsor is.
This slate covers take privates, carve outs and secondary buyouts. Early moves include:
The menu stays broad after that. Among the larger cross-border pieces are £5 billion (about $6.8 billion) to support EQT AB's purchase of Intertek Group Plc, plus around €6 billion of high-yield bonds tied to buying Italian drugmaker Recordati SpA as one element of a broader financing.
Deal flow in the US is still building. In late August, Victory Capital Holdings Inc. announced it will acquire First Eagle Investments and is targeting a $3.5 billion term loan B to fund it. Goldman Sachs Group Inc. plans to line up $1.95 billion in secured debt to back Amwins Group Inc.'s purchase of Steadfast Group Ltd's underwriting agency business. A bank group led by JPMorgan is also working to sell about $5.3 billion of financing for Qualtrics International Inc. later this year.
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Jeremy Duffy, who leads the European leveraged finance practice at Cahill Gordon & Reindel LLP, said, "Lenders will continue to be discerning on credit selection, including around the relevant industry and appropriate capital structure." The most sought after deals should achieve tighter pricing and more borrower friendly terms, while riskier credits will likely pay more and accept stricter documents. In Europe, well regarded single B term loans are expected to open around 325 to 350 basis points over Euribor and, if books are strong, could tighten to 300. Less favored names may price near 375 to 425 basis points, according to market participants.
Fund flows look supportive. LSEG Lipper reports that US leveraged loan funds recorded their biggest weekly intake since January in the week concluding Sept. 2. "Companies want to get funding and refinancing out of the way before those US mid-term elections and whatever that will bring," said Catherine Braganza, high yield portfolio manager at Insight Investment Management. "Investors have cash to deploy and the tone is positive."
Given the macro backdrop, syndicate desks could tweak how they premarket deals so they can launch faster and carry less risk. "While the supply has been well telegraphed and the investor base has cash to put to work, with so much supply there is a risk of pressure on spreads going wider as the market absorbs the new paper," JPMorgan's Roth said.
Supply and demand both look robust, even with inflation concerns and the ongoing war in Iran. JPMorgan tallies nearly €40 billion in Europe and roughly $92 billion in the US earmarked for leveraged M&A, with prospective US data center deals that could pile on as much as $80 billion more. And the momentum isn't set to fade: the pipeline is projected to extend well into 2027, with some transactions already queued for next year, such as a £4 billion euro- and sterling-denominated package to fund OCS Group International Ltd's take-private of Mitie Group Plc.
If you follow credit funds or leveraged loans, watch which borrowers move first and which end up paying more as investors sift through a very full slate.
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